oil spill

Leak at Oil Sands Project in Alberta Heightens Conservationists’ Concerns

August 8, 2013 by NewsMaker

Either way, the leak at the oil sands project in Northern Alberta — which has spilled 280,022 gallons of oil across 51 acres since June — is stoking the controversy over the energy source.

“This mess is a symptom of the problems with the reckless expansion of the tar sands,” said Anthony Smith, a lawyer in the international programs division of the Natural Resources Defense Council in Washington. “Environmental regulations have just not caught up.”

The oil sands industry is booming in Canada, pumping billions of dollars into the economy and providing thousands of jobs. But critics contend that the processes for recovering the low-grade petroleum called bitumen are particularly harmful to the environment. President Obama is weighing climate concerns in his decision to approve — or not approve — the Keystone XL pipeline, which would link Canada’s oil sands with the American Gulf Coast.

The cause of the oil spill at the Royal Canadian Air Force base in Cold Lake, Alberta, remains unclear. The company that owns the project, Canadian Natural Resources, blames abandoned wells in the area. Environmentalists point to fundamental flaws with the company’s process.

Until they find the source of the problem, oil continues to leak at four locations. The spill, modest by historical standards, is manageable for the company, which says it expects to spend $60 million on cleanup and investigation. But already the leak is spoiling the landscape and hurting wildlife. It has killed 71 frogs, 27 birds and 23 mammals, including two beavers, according to the company.

At the site, Canadian Natural Resources uses an approach that is increasingly common for oil sands ventures.

In a process similar to hydraulic fracturing, or fracking, Canadian Natural injects hot steam at high pressures into underground oil sands deposits. The heat liquefies the bitumen and the pressure separates it from the surrounding sand. The process allows the bitumen to flow to the surface through wells.

Canadian Natural has been reluctant to acknowledge the spill, going public only after The Toronto Star published an article based on photographs and documents from a government scientist who was not identified by name. But in a conference call with analysts last week, Steve W. Laut, the company’s president, repeatedly defended its process, saying it had not caused the spill.

Mr. Laut said that the amount of pressure needed to force bitumen through the protective rock layer “is significantly higher” than that used by the company. Instead, he argued that the oil was seeping up through inadequately sealed, abandoned oil wells in the area.

“You cannot have these failures without a well bore failure,” he told the analysts.

Canadian Natural did not respond to requests for comment on Thursday. But the Alberta Energy Regulator has swiftly disputed Mr. Laut’s statement.

“We do not currently have the evidence or data to support any conclusions as to the cause of the incident and look forward to reviewing C.N.R.L.’s information supporting their conclusions on the root cause of the releases,” Jim Ellis, the chief executive of the newly formed regulatory body, said in a statement.

The regulator has ordered some of Canadian National’s operations near Cold Lake suspended and others reduced until the cleanup is complete and a cause for the spill is determined.

A study released in January by Alberta’s previous regulator about a 2009 spill at the same site also appears to undermine the company’s contention that old wells are the source of the problem.

While that study did not determine a cause for the 2009 spill, its authors said that they believed that the protective layer of rock “was likely breached by high-pressure steam injection not related to a well bore issue.”

The study added that the high pressure of the steam that Canadian Natural used probably contributed to the 2009 spill and that the steam and pressure may have created weaknesses in the protective rock layer and provided an escape route for bitumen.

“There’s a pretty strong incentive for the company to portray this as a technical issue because technical issues can be fixed, unlike fundamental issues,” said Chris Severson-Baker, the managing director of the Pembina Institute, an environmental group based in Calgary, Alberta.

But, Mr. Severson-Baker said, this leak, “calls into question how much knowledge the industry and the government have about the integrity of the cap rock before they allow these projects to proceed.”

Article source: http://www.nytimes.com/2013/08/09/business/global/leak-at-oil-sands-project-in-alberta-heightens-conservationists-concerns.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: hydraulic fracturing, northern alberta, oil spill

Arctic Drilling to Be Reviewed in Light of Accidents

January 9, 2013 by NewsMaker Leave a Comment

Officials said the new assessment by federal regulators could halt or scale back Shell’s program to open Alaska’s Arctic waters to oil exploration, a $4.5 billion effort that has been plagued by equipment failures, legal delays, mismanagement and bad weather.

Interior Secretary Ken Salazar said that the expedited review, which is to be completed within 60 days, was prompted by accidents and equipment problems aboard Shell’s two Arctic drilling rigs, the Kulluk and the Noble Discoverer, as well as the Arctic Challenger, a vessel designed to respond to a potential well blowout and oil spill.

In addition, the Coast Guard announced Tuesday that it would conduct a comprehensive marine casualty investigation of the grounding of the Kulluk on Dec. 31.

Shell’s repeated and early misadventures have confirmed the fears of Arctic drilling critics, who said that the company and its federal partners had not shown that they had the equipment, skill or experience to cope with the unforgiving environment there.

Tommy Beaudreau, director of the Interior Department’s Bureau of Ocean Energy Management, will lead the review. “As part of our department’s oversight responsibilities,” Mr. Beaudreau said in a statement, “our review will look at Shell’s management and operations in the Beaufort and Chukchi Seas. We will assess Shell’s performance in the Arctic’s challenging environment.”

The assessment will look at Shell’s safety management systems, its oversight of contracted services and its ability to meet federal standards for Arctic oil and gas operations.

Marvin E. Odum, president of Shell Oil, said of the government assessment: “It’s not a concern to me. I welcome this kind of high-level review. It’s important that both we and the Department of Interior take a look at the 2012 season.”

Mr. Odum added: “There are obviously some issues that need to be worked on, particularly the marine transport.” He said that it was too early to say what damage may have occurred to the Kulluk but that he had “great confidence in this program.”

Shell’s rigs drilled two shallow wells last summer, but were halted by government officials before they reached oil-bearing formations. Officials would not allow Shell to drill deeper because the company did not have the required capacity to contain spills after the testing failure of a device designed to cap a runaway well and collect the oil.

In the past several months, the Coast Guard has examined the containment barge and the rebuilt dome, and both passed necessary tests. But the Bureau of Safety and Environmental Enforcement still needs to inspect the equipment before it can be deployed. Those inspections were originally to be done later this month, but have been put off because of the Kulluk accident.

Environmental advocates have been leery of the Arctic drilling program for years and became especially vocal after the Kulluk ran aground.

Greenpeace, which is circulating petitions calling on President Obama to halt the Arctic drilling program, said that the Interior Department’s reassessment was long overdue.

“We’ve repeatedly been told Shell is the best in the business, and so we can only conclude after this series of mishaps that the best in the business is simply not good enough for the Arctic,” said Dan Howells, Greenpeace deputy campaigns director. “We only hope that 60 days is long enough to properly examine the extraordinary number of dangerous incidents that have beset Shell’s accident-prone drilling program and put Alaska’s environment at risk.”

Michael LeVine, senior Pacific counsel for the environmental advocacy group Oceana, said that government regulators were too lax in allowing the program to go forward without adequate assurances that Shell could operate safely and competently.

“We hope this review amounts to more than a paper exercise,” Mr. LeVine said. “The Department of the Interior, after all, is complicit in Shell’s failures because it granted the approvals that allowed Shell to operate.”

The Kulluk was towed to a safe harbor on Monday, where it will undergo extensive inspections before continuing its journey to its winter home in Seattle.

If the Kulluk, which Shell has upgraded in recent years at a cost of nearly $300 million, is found to have been wrecked or substantially damaged, it will be hard for the company to find a replacement and receive the numerous government permits needed to resume drilling in July, as it has planned.

Under Department of Interior rules governing Arctic drilling, the company must have two rigs on site at all times to provide for a backup vessel to drill a relief well in case of a blowout, an uncontrolled escape of oil or gas.

The Kulluk, which does not have a propulsion system of its own, ran into trouble in late December when its tow ship, the Aiviq, lost engine power and the towline separated in high winds and heavy seas.

Shell’s other Arctic drill ship, the Noble Discoverer, has also had problems. In July, before sailing to the Arctic, it nearly ran aground after dragging its anchor in the Aleutian Islands. Then in November it had a small engine fire.

Later that month, during an inspection in the Alaskan port of Seward, the Coast Guard found more than a dozen violations involving safety systems and pollution equipment.

At the end of December, the Noble Corporation, the Swiss company that owns the 512-foot-long drill ship and is leasing it to Shell for $240,000 a day, said that many of the problems had been repaired and that the ship was preparing to sail to Seattle to fix the remainder of them.

Article source: http://www.nytimes.com/2013/01/09/us/arctic-drilling-to-be-reviewed-in-light-of-accidents.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: marine casualty, oil spill, safety management systems

Contractor on Oil Spill Has Settled With BP

December 17, 2011 by NewsMaker Leave a Comment

Cameron, based in Houston, designed and manufactured the so-called blowout preventer on the drilling rig, which failed to stop the oil from spilling. The settlement, which is BP’s fourth so far with companies that worked on some parts of the well, was not an admission of liability by either party, BP said.

The “settlement allows BP and Cameron to put our legal issues behind us and move forward to improve safety in the drilling industry,” Robert W. Dudley, the BP chief executive, said in the company’s statement. “Unfortunately, other companies persist in refusing to accept responsibility for their roles in the accident and for contributing to restoration efforts.”

BP had already agreed to similar settlements with Anadarko Petroleum; a unit of Mitsui Oil Exploration, MOEX, which had stakes in the well; and Weatherford International, which made a part of the well. Those settlements totaled about $5.1 billion.

Legal fights over claims worth tens of billions of dollars continue with Transocean, which owned and operated the rig, the Deepwater Horizon, and with Halliburton, which was responsible for cement work.

BP plans to use the cash payment from Cameron to help settle individual and government claims and pay for costs related to the oil spill.

The company had set aside about $41 billion to cover all costs related to the spill, including a $20 billion compensation fund. It said Friday it had already paid out about $7.5 billion to local businesses and individuals.

BP said Cameron agreed that the well failure and the explosion of the drilling rig was the result of several complex and interlinked issues and not the fault of one single company. BP said it agreed to indemnify Cameron for compensation claims resulting from the accident as part of the settlement.

Cameron said Friday that the settlement was “the right action as it removes uncertainty facing Cameron in the litigation associated with the Deepwater Horizon event.”

“Though this agreement does not provide indemnification against fines and penalties, punitive damages or certain other potential noncompensatory claims, we do not consider these items to represent a significant risk to Cameron,” Jack Moore, the chief executive, said in a statement. Cameron said its insurance would cover at least $170 million of the settlement and that the company would have to take a charge in the fourth quarter for the remaining amount.

The explosion in the Gulf of Mexico on April 20, 2010, killed 11 workers and caused a spill of nearly five million barrels of oil.

BP has continued to invest in exploration in the United States and the Gulf of Mexico, and in October received its first permit from United States regulators since the oil spill to drill a new well in the region.

Article source: http://feeds.nytimes.com/click.phdo?i=137a3ee7a99fb7db9dae530d5cf9ed5b

Filed Under: Business News Tagged With: compensation claims, oil spill, restoration efforts

No BP Word As Deadline Slides By

May 17, 2011 by NewsMaker Leave a Comment

With the companies issuing no statements as the deadline neared, some analysts took the lack of an announcement as indication that the two sides would continue to negotiate revised terms for the deal, which was announced in January by the chief executive of BP, Robert W. Dudley, but quickly hit a legal snag when Russian shareholders in a separate BP partnership filed a legal action to block it.

People close to BP said they expected the company to issue a statement Tuesday morning in London.

Shares of BP fell 1 percent in London on Monday amid concern that the Rosneft deal could collapse — and with it BP’s plan to recover from last year’s Gulf of Mexico debacle by expanding into Russia.

The two companies originally planned to complete that deal a month ago, but had extended the deadline to midnight Monday, London time, to give BP time to resolve its dispute with its Russian partners in a separate venture called TNK-BP.

Those Russian partners, operating through a holding company known as AAR, contend that BP violated terms of the partnership in forging the agreement with Rosneft. An international arbitration court in Stockholm that has handled the AAR complaint ruled recently that BP-Rosneft could complete the part of the deal involving a stock swap but would have to include TNK-BP in the Arctic exploration part of the agreement.

For the deal to proceed, Rosneft and BP would presumably have to renegotiate terms and either include TNK-BP or somehow buy out AAR’s stake.

A collapse of the Rosneft deal would be a major blow to BP’s effort to win back the confidence of investors after the company’s disastrous oil spill last year in the Gulf of Mexico, some analysts said. The deal was to give BP access to the Kara Sea, one of the icy backwaters of the Arctic Ocean that has recently become an object of keen attention by the international energy industry as a new oil frontier.

“This deal is very important,” said Doug Youngson, an analyst at Arbuthnot Securities in London. “This is how BP in theory was going to come back after the Gulf of Mexico accident.”

After the deal was announced in January, and was publicly blessed by Russia’s prime minister, Vladimir V. Putin, and president, Dmitri A. Medvedev, BP’s stock rose. The company seemed poised to secure access to the Arctic at a time when lawsuits and regulations in the United States and Canada were delaying drilling, and when in particular BP’s chances of winning new offshore licenses in North America appeared dim.

But the AAR partners in TNK-BP sued within days to block the arrangement and demanded to be part of the new business. AAR rejected an offer from BP in January to pay it in oil assets and cash to remove its objections. AAR later turned down an offer by BP to buy its stake in TNK-BP.

Under the conditions set down by the Stockholm court, BP would still retain a financial interest in the Arctic deal but would lose some operational control. But any revised terms would hinge on Rosneft’s approving the involvement of TNK-BP, whose Russian partners are not necessarily in accord with the Kremlin leaders who ultimately oversee Rosneft.

Rosneft has said it would prefer to work with BP directly, rather than through TNK-BP. This has left the three parties — BP, Rosneft and the AAR partners — at an impasse.

Some analysts have described three possible outcomes for BP. One would involve Rosneft either agreeing to the changed terms, or at least extending the deadline again, which would give the three parties more time to find a compromise.

Another possibility could be BP’s resolving the dispute with AAR by buying the stake in the TNK-BP joint venture it does not already own. Such a step would be costly for BP, which is still paying for the Gulf of Mexico spill, but Rosneft could take a part in any buyout.

And it is unclear whether the Russian shareholders in TNK-BP would sell. BP said a month ago that it had made a cash offer of about $27 billion to the shareholders, but they rejected it. The AAR partners have valued TNK-BP at about $70 billion, meaning a buyout would cost Rosneft and BP about $30 billion.

A third possibility, of course, would be the collapse of the BP-Rosneft deal. Yet, some analysts said that BP could then still try to strike a new pact with Rosneft.

Rosneft, though, would also be free to open talks with other major international oil companies to explore the Kara Sea if its deal with BP collapsed. But while other Big Oil companies might be eager to gain Kara Sea access, it is not clear whether any company other than BP — financially burdened by its Gulf of Mexico liabilities — would agree to sell part of itself to the state-owned Russian oil company.

A spokesman for BP in London declined to comment, as did a spokesman for the group of Russian billionaires who are shareholders in TNK-BP. Rosneft representatives were not available.

Oil analysts in Moscow have said AAR, by becoming an obstacle to this pivotally important deal for both BP and the Russian government, could be positioning itself to win a higher buyout price. AAR representatives have said that was not their motivation in blocking the deal.

Despite a quarrelsome history with its partners, BP’s Russian venture has been a success for years. After contributing about $6 billion in cash and assets to the founding of the TNK-BP venture in 2003, BP has since then made more than $14 billion in dividends from it — it still retains 50 percent of the assets.

With BP’s operations in Russia becoming nearly as important to the company as those in the United States, it was logical that in the wake of the Gulf of Mexico oil spill last year BP would seek to expand its Russian operations.

The question now is whether that logic can play out.

Julia Werdigier reported from London and Andrew E. Kramer from Moscow.

Article source: http://www.nytimes.com/2011/05/17/business/global/17bp.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: arctic exploration, oil spill, stock swap

Companies, Crews and Regulators Share Blame in Coast Guard Report on Oil Spill

April 23, 2011 by NewsMaker Leave a Comment

The Coast Guard’s harshly worded 288-page study also declared that the Republic of the Marshall Islands, the mobile offshore drilling rig’s flag state, had failed in its regulatory duties. And the study faulted the Coast Guard itself for failing to ensure that large, complex offshore drilling units registered in foreign nations but operating in United States waters were properly maintained, staffed and inspected.

“Although the events leading to the sinking of Deepwater Horizon were set into motion by the failure to prevent a well blowout,” the report states, “the investigation revealed numerous systems deficiencies, and acts and omissions by Transocean and its Deepwater Horizon crew, that had an adverse impact on the ability to prevent or limit the magnitude of the disaster.”

The April 20, 2010, explosion and fire aboard the rig killed 11 men and injured 16 others. The resulting oil spill poured nearly five million barrels of oil into the Gulf of Mexico.

Transocean was under contract to BP to drill the Macondo well in 5,000 feet of water in the gulf off the coast of Louisiana. Since the fatal accident, BP, Transocean and another major contractor, Halliburton, have engaged in recriminations and lawsuits, with each accusing the others of negligence. Friday’s report will certainly become a factor in the resulting litigation and will most likely be read closely by Justice Department criminal and civil investigators.

Transocean’s failures included the “inhibiting” of automatic safety warning systems, a lack of drills for an emergency evacuation, the installation of electrical equipment in places where it could ignite gases, a lack of barriers to protect crew members from a blast or fire, and a history of safety violations that were not addressed, according to the study. The rig also did not comply with regulations regarding the integrity of internal watertight compartments, and the crew did not have proper training or knowledge of onboard safety systems, the Coast Guard found.

“The investigation revealed that Deepwater Horizon and its owner, Transocean, had serious safety management system failures and a poor safety culture,” the report said.

Transocean disputed some of the central conclusions of the report, including assertions that it had failed safety inspections and did not have adequate fire prevention equipment on board.

“We strongly disagree with, and documentary evidence in the Coast Guard’s possession refutes, key findings in this report,” Lou Colasuonno, a Transocean spokesman, said in an e-mailed statement Friday afternoon. “The Coast Guard inspected the Deepwater Horizon just seven months before the Macondo incident and certified the rig as being fully compliant with all applicable U.S. and international marine safety compliance standards, including those associated with fire and gas detection systems. Further, at the time of the accident the Deepwater Horizon possessed all required valid documents verifying compliance with all international and Coast Guard requirements.”

The government of the Marshall Islands, in a statement, criticized the Coast Guard report as based on “conjecture and speculation.” Bill Gallagher, the islands’ senior deputy commissioner of maritime affairs, said his government was conducting its own investigation and complained that the islands were not allowed to review or comment on the Coast Guard report.

He also said the Coast Guard should have waited until the investigation was complete before delivering its verdict.

The Coast Guard and the Interior Department conducted 25 days of public hearings and have spent much of the past year interviewing witnesses and reviewing documents from the companies involved in the accident. Because the drilling rig is classified as a ship, its operations fall under Coast Guard jurisdiction. Six current or retired Coast Guard officers oversaw its part of the investigation, although only three are named in the report.

The report does not address the role of the other parties in the disaster. A separate study of the causes of the well failure is being prepared by the Bureau of Ocean Energy Management, Regulation and Enforcement, the federal regulatory agency that oversees offshore drilling. That report is due in July.

Numerous other investigations, including one by a panel appointed by President Obama, have found that BP’s drilling practices, Halliburton’s cement work and Transocean’s operation of the rig all contributed to the accident.

Article source: http://feeds.nytimes.com/click.phdo?i=f330b541a2955313603497ace087effc

Filed Under: Business News Tagged With: acts and omissions, emergency evacuation, oil spill

BP Seeks to Resume Drilling in Gulf of Mexico

April 4, 2011 by NewsMaker Leave a Comment

The petition comes less than 12 months after a rig BP had leased there exploded, causing a huge oil spill and killing 11 workers. The accident tarnished BP’s image and raised questions about its safety procedures.

Just last week, the Justice Department confirmed that it was considering a range of civil and criminal penalties against BP, including potential manslaughter charges for the deaths of the rig workers, as part of its ongoing investigation into the accident.

At the same time, President Obama, in a major statement on energy policy last week, said the administrations was seeking to reduce dependence on imported oil in part by increasing domestic production, both onshore and off. BP was one of the major producers in the gulf before the accident.

BP is seeking permission to continue drilling at 10 existing deepwater production and development wells in the region in July in exchange for adhering to stricter safety and supervisory rules, said one of the officials. An agreement could be reached within the next month but would not include new drilling, the official said.

The other official said, “We’re making progress but it’s not a yes yet.” Both people spoke on the condition of anonymity because talks on a possible agreement were continuing.

Drilling in the Gulf of Mexico was halted last summer as a result of the accident involving BP’s Macondo well, which spilled 4.9 million barrels of oil into the ocean. The ban was lifted in October.

Melissa Schwartz, a spokeswoman for the Bureau of Ocean Energy Management, Regulation and Enforcement, the federal agency that overseas the development of resources in the gulf, said on Sunday that there was no deal with BP. Toby Odone, a spokesman for BP, declined to comment.

The regulator had recently started to permit some deepwater drilling in the Gulf of Mexico. Royal Dutch Shell won approval on Wednesday to drill off the coast of Louisiana on the condition that rigorous new safety standards were met. Other companies that have been allowed to continue drilling in the region include Exxon Mobil, Chevron and BHP Billiton.

Federal officials have said any company that wants to resume drilling in the gulf would have to meet the new safety requirements.

But granting permission to BP would be more controversial because the British oil company is still paying for costs related to the oil spill, the cleanup and the continuing civil and criminal investigations into the accident. BP so far has set aside more than $40 billion to cover those costs.

The administration has pressed BP to ensure that victims of the spill are compensated, but the company has said publicly it needs to resume drilling in the gulf in order to have the financial resources to pay the claims submitted by federal and state officials, and individuals and businesses.

The Obama administration has spent 11 months dealing with the aftermath of the Macondo well blowout and writing new rules to try to prevent similar accidents.

Allowing BP to resume operations in the gulf would send a mixed message — that even as the administration was trying to increase the safety of offshore drilling and punish bad actors, it was responding to critics in Congress and the oil industry who say the administration is choking off production and driving up energy prices.

What seems clear is that the gulf will not return to full production until all the major players are allowed to resume drilling.

BP is eager for that to happen, and its chief executive, Robert Dudley, has repeatedly said the company remains committed to its operations in the United States. Mr. Dudley has pledged to make improving BP’s safety record his priority. He set up a new division last year to monitor safety and suspended some operations in Alaska and the North Sea after the projects failed to meet the new standards.

Gaining permission to resume drilling in the gulf would help Mr. Dudley to move BP beyond its painful and expensive recent history in the region, which has eroded shareholder trust. It would also give BP a boost of confidence.

The British oil company suffered a setback in its expansion strategy last month when a Swedish court blocked a $10 billion cooperation agreement with Rosneft of Russia, which was supposed to give the company access to the Arctic.

The drilling ban had cost oil companies tens of millions of dollars as they were required to keep rigs warm and ready to drill. The Obama administration lifted the drilling ban early but said that companies must meet the new safety standards before they could resume drilling.

They include new standards for well design, casing and cementing. Companies would also require verification from a third party that safety devices like blowout preventers, which failed during the BP spill, were properly designed and tested.

Some environmental groups had criticized the decision, saying it was too early to grant drilling permits again while details of the accident were still being investigated.

Julia Werdigier reported from London and John M. Broder from Washington. Clifford Krauss contributed reporting from Doha, Qatar.

Article source: http://www.nytimes.com/2011/04/04/business/energy-environment/04bp.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: energy management, obama, oil spill

BP Seeks to Resume Drilling in the Gulf of Mexico